Futures trading dates back to 1851, when the first futures contract was established. Originally dominated by commercial and institutional traders, futures markets are now accessible to individual traders and investors aiming to profit from predicting future price movements of commodities, indices, and other assets.
Recent unprecedented shifts in commodity markets have made futures trading more popular than ever. However, many traders find this investment vehicle complex and intimidating. This guide provides a step-by-step plan and actionable tips for trading futures successfully.
Key Takeaways
- Learn what futures contracts are and how they work
- Discover where futures are traded globally
- Understand practical examples of futures trading
- Compare futures vs. CFDs (Contracts for Difference)
- Get started with proven futures trading strategies
What Are Futures Contracts?
The first futures contract was drafted in 1851 at the Chicago Board of Trade (CBOT), involving corn as the underlying commodity. The agreement allowed a farmer (seller) and an industrial company (buyer) to lock in a future exchange of goods at a fixed price.
Essentially, a futures contract is:
- An agreement to buy/sell an asset at a predetermined price
- Settled on a specified future date
- Standardized in terms of quality, quantity, and delivery terms
👉 Explore how futures work in modern markets
Where Are Futures Traded?
Futures are traded on regulated exchanges worldwide. Key exchanges include:
| Exchange | Location | Notable Products |
|----------|----------|------------------|
| CME Group | Chicago | Indices, Interest Rates |
| CBOT | Chicago | Grains, Soybeans |
| NYMEX | New York | Energy, Metals |
Europe and Asia also host major futures exchanges like Eurex (Germany) and SGX (Singapore).
Example: Trading Oil Futures
Let’s break down a crude oil futures contract (CL):
- Contract Size: 1,000 barrels of WTI crude oil
- Price Quoted Per Barrel: E.g., $75.50
- Value Calculation: $75.50 × 1,000 = $75,500 per contract
Traders speculate on price movements without physically handling oil. Profits/losses are settled daily.
Futures Trading Strategies
- Day Trading: Capitalize on short-term price swings (high risk, requires discipline).
- Spread Trading: Profit from price differences between related contracts.
- Hedging: Used by producers/consumers to lock in prices (e.g., farmers hedging crop prices).
👉 Try futures trading risk-free with a demo account
Why Trade Futures via CFDs?
Contracts for Difference (CFDs) offer advantages over traditional futures:
- Smaller contract sizes (accessible to retail traders)
- No expiration dates
- Trade 24/5 on indices, commodities, and more
Comparison:
| Feature | Futures | CFDs |
|---------|---------|------|
| Contract Size | Large (e.g., 1,000 barrels) | Flexible |
| Expiration | Fixed date | None |
| Commission | Low | Varies by broker |
FAQ
Q: Can I trade futures with $500?
A: Yes, via CFDs—but traditional futures require more capital due to contract sizes.
Q: What’s the best platform for futures trading?
A: MetaTrader 5 (MT5) offers advanced tools for futures and CFDs.
Q: How do I manage risk in futures trading?
A: Use stop-loss orders and position sizing to limit exposure.
Get Started Today
- Open a demo account to practice risk-free.
- Choose a strategy aligned with your goals.
- Trade with confidence using reliable analytics.
👉 Start your futures trading journey now
Final Tip: Always stay updated on market news and economic events impacting futures prices. Happy trading!